Helvering v. Owens, 305 U.S. 468 (1938)
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U.S. Supreme Court HELVERING v. OWENS, 305 U.S. 468 (1939)
[Page 305 U.S. 468, 469]
Messrs. Homer S. Cummings, Atty. Gen., and Norman D. Keller, of Washington, D.C., for Commissioner of Internal Revenue.
Mr. Ewing Everett, of New York City, for Owens and Obici.
Mr. Justice ROBERTS delivered the opinion of the Court.
The court below have given opposing answers to the question whether the basis for determining the amount of a loss sustained during the taxable year through injury to property not used in a trade or business, and therefore not the subject of an annual depreciation allowance, should be original cost or value immediately before the casualty. [Footnote 1] To resolve this conflict we granted certiorari in both cases. 305 U.S. 582, 59 S.Ct. 79, 83 L.Ed. --; 305 U.S. 585, 59 S.Ct. 97, 83 L.Ed. --.
[Page 305 U.S. 468, 471]
exhaustion, wear and tear, obsolescence, amortization, and depletion, to the extent allowed (but not less than the amount allowable) under this Act or prior income-tax laws.'
The income tax acts have consistently allowed deduction for exhaustion, wear and tear, or obsolescence only in the case of 'property used in the trade or business.' The taxpayers in these cases could not, therefore, have claimed any deduction on this account for years prior to that in which the casualty occurred. For this reason they claim they may deduct upon the unadjusted basis,-that is,-cost. As the income tax laws call for accounting on an annual basis; as they provide for deductions for 'losses sustained during the taxable year'; as the taxpayer is not allowed annual deductions for depreciation of non-business property; as section 23( h) requires that the deduction shall be on 'the adjusted basis provided in section 113(b)', thus contemplating an adjustment of value consequent on depreciation; and as the property involved was subject to depreciation and of less value in the taxable year, than its original cost, we think section 113(b)(1)(B) must be read as a limitation upon the amount of the deduction so that it may not exceed cost, and in the case of depreciable non-business property may not exceed the amount of the loss actually sustained in the taxable year, measured by the then depreciated value of the property. The Treasury rulings have not been consistent, but this construction is the one which has finally been adopted. 4
In No. 180 judgment reversed.
In No. 318 judgment affirmed. Footnotes
Footnote 1 Helvering v. Owens, 2 Cir., 95 F.2d 318; Helvering v. Obici, 4 Cir.,
Footnote 2 c. 277, 48 Stat. 680, 23(e), (f), (h), (l), 24(a)(1), 41, 113, 26 U.S.C. 23, 24, 41, 113, 26 U.S.C.A. 23(e, f, h, l), 24(a)(1), 41, 113.
Footnote 3 c. 209, 47 Stat. 169, 23(e), (f), (g), (k), 24(a)(1), 113, 26 U. S.C.A. 23, 24, 113.
Footnote 4 Treasury Regulations 86, Arts. 23(e)-1, 23(h) 1, 113(b) 1; G.C.M. XV 1, Cumulative Bulletin 115-118.
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